Statistical Techniques for Forensic Accounting: Understanding the Theory and Application of Data Analysis

12. Regression and Correlation

Prediction is very difficult, especially if it’s about the future.

—Niels Bohr, Physicist (1885–1962)

12.1. Introduction

Fortunately, in forensic accounting we are not in the business of predicting the future; rather, we unravel the past. Probability concepts were introduced in Chapter 6, “Transitioning to Evidence,” by defining marginal, joint, and conditional probabilities. Subsequent chapters introduced various probability distributions to assess the marginal probability of a variable. Also you learned about techniques for estimating the parameters of variable based on sample information. These methods and techniques were for each variable, in isolation. This chapter discusses situations when the value of a ...